IOC-Oil India Merger On The Cards

Even as the Union Cabinet is getting all set to bless the mega ONGC-HPCL merger, ET Now exclusively learns that the Narendra Modi government has already zeroed in on another mega transaction between PSUs to create yet one more oil behemoth. According to sources, Indian Oil is in talks to buy out the government’s 66% stake in upstream major Oil India.

This is all a part of the Modi government’s vision to create integrated oil and gas companies, and as announced by the Finance Minister in his 2017 Budget speech.

Sources told ET Now that the modalities of the IOC-Oil India merger are still to be finalised, and no call has been taken whether this should be an all cash deal or an all stock deal or a mix of cash and stock.

The timing of the IOC-Oil India also has to be determined. Sources said that while one view is to conclude the merger quickly and within this fiscal, there is another view to execute the merger once the ONGC-HPCL merger is closed. The rationale for the latter is there should be enough time for the government to conclude a 3% stake sale in IOC for which the Cabinet has already given the green signal, and also for ONGC to pare down its 14% odd stake in IOC to fund the 51% buyout of HPCL.

However, with Oil India’s m-cap being 10% of IOC’s, the word on the street is that the IOC-Oil India merger will be far easier to transact than the much bigger and far more complex merger between ONGC and HPCL. Last fiscal, IOC had overtaken ONGC as India’s most profitable PSU.